efforts of the government, industrialization has spread outside of Metro Manila
and into the provinces. Among the fastest growing new industrial areas has been
Metro Cebu.

The rapid industrial development of Metro Cebu, however, raises serious
concerns about the well-being of its sensitive coastal environment. At present,
there are already reports that industries contribute significantly to the pollution
in the area. It is feared that unbridled industrial growth in the future will lead to
further environmental degradation which can negate the economic gains from
industrialization.
This Policy Notes summarizes the results of a recent study (Israel 1997)
which looked into the relationships between industrial growth, industrial pollution and environmental protection in Metro Cebu, usPIDS Policy Notes are observations/analying the manufacturing sector as case study. The purpose of the
ses written by PIDS researchers on certain policy
research was to gather information that could be of use in formulatissues. The treatise is wholistic in approach, and
like the PIDS Executive Memo, it aims to proing recommendations for the proper management of industrial polvide useful inputs for decisionmaking.
lution in Metro Cebu and other similarly situated areas in the country.
————————
*Based on a paper sponsored by and submitted to the United Nations Industrial Development Organization (UNIDO) project entitled "Industrial Policy and the Environment in the
Philippines."

The author is Research Fellow at the Institute. The views expressed are those of the
author and do not necessarily reflect those of
PIDS or any of the study's sponsors.

2

Focus of the Study
Based on available data, two
groups of mutually exclusive
manufacturing establishments in
Metro Cebu were studied in detail. These were the (a) Board of
Investments (BOI)-registered
projects, and (b) Mactan Export
Processing Zone (MEPZ) firms. As
shown in Tables 1 and 2, the number of establishments falling under the two groups has rapidly increased over the years. While
growth was faster in the late 1980s
than in the early 1990s, the overall performance for the 1975-96
period was clearly impressive.
Among the BOI projects, the
largest subsectors have been food
and furniture manufacturing while
among the MEPZ firms, the largest number has been wearing apparel manufacturing. In Metro
Cebu, these subsectors were made
up largely of small and medium
enterprises (SMEs).

Looking at the Sector's
Pollution Potential
Because of the rapid industrial growth in Metro Cebu, fears
about possible significant pollution
in the area logically arose. To ascertain the potential effects of the
manufacturing sector in terms of
industrial pollution, the establishments were matched with the pollution potential classification of
industries formulated by the Environmental Management Bureau
(EMB 1993). Results showed that
a significant percentage of the cur-

Policy

rently operating BOI and MEPZ
establishments were potentially
pollutive and/or hazardous (Table
3). In particular, about 40 percent
of the establishments were found
to be potentially pollutive while approximately 49 percent were potentially hazardous. It was also
noted that among the subsectors
with a large SME composition,
food manufacturing was found to
be potentially highly-pollutive
while furniture manufacturing was
potentially hazardous.

Industrial Pollution
Prevention:
Laws and Compliance
There are a number of national laws relating to industrial
pollution enacted in the Philippines over the years. One important legislation is Presidential Decree (PD) 1586 of 1978 which
established the Environmental
Impact Statement (EIS) system.
Among others, the EIS system requires all environmentally critical
firms to submit an Environmental
Impact Assessment (EIA) study
and get an Environmental Clearance Certificate (ECC) from the
Department of Environment and
Natural Resources (DENR) before
they operate.
Another major legislation is
PD 984 or the National Pollution
Control Decree of 1976 as
amended by Executive Order (EO)
192 of 1987. This law stipulates
that the prevention, abatement and
control of pollution is a national

Notes

policy. Its implementing rules and
regulations are provided in DENR
DAO Nos. 34 and 35 which outline the water and air quality standards to be adhered to by polluting industries. To meet these standards, the DENR requires potentially risky industries insofar as the
environment is concerned, to establish wastewater treatment facilities (WTF) or air pollution control
device (APCD) for waste clean-up.
Still another important piece
of legislation relating to industrial
pollution is Republic Act (RA)
6969 or the Toxic Substances and
Hazardous Wastes Control Act of
1990. This law regulates the production, use and trade of toxic and
hazardous wastes by industries.
How do the industrial establishments in Metro Cebu as a
group respond to these laws? To
what extent is pollution control
practised by these firms?
Establishments with ECCs.
The regional DENR has been requiring all industrial firms in Metro
Cebu to acquire ECCs. However,
based on available 1995 data, only
a small portionâ&#x20AC;&#x201D;about 16 percentâ&#x20AC;&#x201D;of the operating manufacturing establishments had ECCs
(Table 4). This low compliance
rate was even worse among some
subsectors which were potentially
highly pollutive or hazardous. For
instance, only 10 percent of establishments in the food manufacturing industry had ECCs.
To address the problem of
establishments operating without
April 1997

Source: BOI Makati Office Data Files
a
The list includes all projects, currently operating or not.
b
Mixed industries are those whose activities/products fall under more than one industry classification.

Source: DENR Region VII, EIAD Files
Note: The establishment data are in terms of the number of firms.

Policy

Notes

April 1997

7

an ECC, the DENR has been exerting efforts to penalize those
caught intentionally disregarding
the regulation. The data, however,
indicate that for 1995, only 15
firms were penalized which was an
insignificant count compared to the
total potential number of violators.1
Establishments with WTFs.
Similarly, only a small portion—
approximately 4 percent—of the
operating establishments in Metro
Cebu had WTFs and the low rate
held true even among subsectors
which were potentially environmentally risky (Table 5). For instance, only 7 percent of firms had
WTFs in food manufacturing, a
subsector generally known as a
generator of significant volumes of
wastewater. It is difficult to ascertain the level of actual compliance
among firms as there was no available information on the exact number of firms required to put up the
WTFs. The high dominance of
potentially environmentally risky
firms without water treatment facilities implied in the data, however, indicates that compliance
may indeed have been low.
Establishments with APCDs.
In contrast, a relatively higher percentage of operating establishments in Metro Cebu—about 37
percent—had APCDs (Table 6).
This higher rate prevailed as well
———————
1
All firms as early as 1995 were required
to have ECCs in Metro Cebu, regardless of
scale. There are no available data, however,
that break down firm compliance by scale.

Policy

in some subsectors which were
potential generators of significant
levels of air pollution. In the furniture industry, for instance, 57
percent of the firms had air pollution control facilities. Nonetheless,
inspite of the improvement, a large
percentage of firms which were
potentially air-polluting remained
without APCDs, indicating that air
pollution remains a serious problem in the manufacturing industry.
Toxic and hazardous waste
management. In general, the
implementation of RA 6969 in
Metro Cebu has been quite slow.
At present, the DENR activities
related to its implementation are
preliminary in nature, e.g., staff
briefings, preparation of an inventory of chemicals used by firms,
and similar activities.
In general, among the manufacturing establishments, current
practices for the handling and disposal of industrial wastes, including toxic and hazardous, leave
much to be desired. For untreated
wastewater, for example, the disposal is usually done by draining
the water directly into the drainage systems that flow into canals,
river systems and ultimately the
sea. In the case of sludge and
chemical wastes, the wastes are
stored in drums and other durable
containers and placed in safehouses within plant sites. The
firms' plans for the disposal of
these stored wastes over the longterm or when they close shop are
not known.

Notes

To help address the problem
of toxic and hazardous wastes, the
Philippine-German Project on Industrial Pollution Control Cebu
(PGP-IPCC), a foreign-funded
project, was set up in the early
1990s. Among its ongoing activities is the establishment of a common wastewater treatment plant in
the area. The plant is envisioned
to service the highly pollutive electroplating subsector which has a
large SME component. Because of
the specific clientele of the treatment plant, however, it does not
cover the problem of toxic and
hazardous wastes coming from
other potentially pollutive manufacturing subsectors.

Conclusions
The following conclusions
may be drawn from the findings
of the study.
First, although there has
been rapid growth in the industrial sector of Metro Cebu, this
development has been dampened
by a negative side-effect: the proliferation of potentially environmentally risky firms, many of
which are SMEs. Second, the environmental protection efforts by
the government have not kept pace
with the industrial development in
the area. In particular, environmental regulations have not been
effectively implemented as manifested by the relatively low percentage of potentially pollutive or
hazardous establishments with
ECCs and pollution control facilities and the non-implementation of
April 1997

Source: DENR Region VII, EQD Files
Note: The establishment data are in terms of the number of firms.

Policy

Notes

April 1997

10

the law regulating toxic and hazardous wastes.

Recommendations
For Metro Cebu to be able
to meet the challenges of rapid
industrial growth, a number of
recommendations are hereby being proposed.
First, the EIS system must
immediately be streamlined. In its
1995 policy study, the Industrial
Environmental Management
Project (IEMP) came up with a list
of suggestions on how to improve
the EIS system (IEMP 1995). The
government must seriously consider these suggestions and implement them without delay. Among
others, the suggestions which merit
forceful enforcement is the raising of the penalty fee to a significantly higher level on firms operating without ECCs and the expansion of coverage of the EIS system to all development projects.
The former provides a substantial
financial disincentive for establishments not to comply to regulations
while the latter promotes proper
pollution management regardless
of the nature and scale of manufacturing operations.
Second, to improve on the
implementation of industrial pollution regulations and laws, the
division of the regional DENR
implementing them, the Environmental Quality Division (EQD),
must be strengthened. At present,
this division suffers from major
resource constraints, especially

Policy

given the magnitude of its tasks.
For instance, personnel doing
monitoring have to individually
cover a large number of firms scattered in a wide regional area. Furthermore, transport facilities are
wanting and allowances are
oftentimes barely enough to cover
travel expenses. Thus, the staff and
budget of the division must be
improved proportionate to the increasing clientele it is handling. A
rough estimate is that resources
have to be raised to at least double
the current level for the division
to satisfactorily meet the current
demand for its services.
Third, another important reform is the strengthening of the
legal arm of the DENR. At present,
there are only a couple of lawyers
serving in the regional office. Immediate action to address this
problem is important since success
in the implementation of environmental laws depends to a large
extent not only on the technical
ability to monitor and identify offenders but also on the legal ability to file and win cases in court
against them. There is a dire need
to study ways to raise the number
of quality lawyers in the DENR.
Fourth, to improve pollution
management among the SMEs,
assistance to this group is necessary and must be considered. The
efforts of the PGP-IPCC to help
the SMEs in the electroplating industry is a big step in the right
direction. Once this project ends,
there is the need for the

Notes

government to continue what it
started and, if possible, expand
efforts to a larger coverage, i.e.,
other industrial subsectors. There
are some specific concerns which
the government can concentrate on
with regard the SMEs. One is in
the area of financing. Since it is
generally thought that SMEs have
limited capability to solely finance
pollution control, the government
may come in and help address the
problem. Another area is compliance monitoring. As mentioned,
the DENR currently has limited
capability to monitor firms, including the thousands of SMEs, and
badly needs help from other
government agencies and even the
private sector. Thus, it must look
for ways to establish strong linkages with other entities for monitoring purposes. An interesting
effort along this line is the Joint
Inspection Team (JIT) for monitoring which the DENR, Department of Labor and Employment
(DOLE),and the Department of
Health (DOH) together are currently pilot-testing. This experiment certainly deserves credit although its present participants are
composed mostly of national
government agencies and some
segments of the private sector only.
The above brings us to the
fifth recommendation which is the
active tapping of the local
government units (LGUs) for pollution management. With the
devolution of some previously centralized environmentally-related
functions, these units have become
April 1997

11

a potent force in environmental
management. In general, the
newly-formed provincial and municipal natural resources and environment committees and offices
must be made active in industrial
pollution control such as monitoring activities. In addition, the
government must explore avenues
through which the LGUs can help
assist in pollution law enforcement.
Relatedly, to further involve
LGUs in industrial pollution control, local legislators must be
trained in environmental legislation. These officials can potentially
assist in pollution control via the
formulation of local ordinances
that supplement national pollution
laws. Specifically, provincial board
members and city and municipal
councilors must be trained in the
relevant environmental sciences so
that they can gain the technical
knowledge needed for the formulation of environmental legislation
for their areas.
Sixth, over the long-term and
beyond the current efforts to control industrial pollution in Metro
Cebu, the use of market-based instruments should also be studied.
At present, pollution control in the
area as well as in the Philippines
as a whole has been centered on
the use of regulatory instruments.
Theoretical developments in recent years, however, suggest that
it may be superior to mix marketbased and regulatory instruments
instead of solely using just the latter for pollution management. In

Policy

particular, the imposition of pollution charges by subsector based
on the estimated monetary values
of pollution-related damages may
be a potent tool for pollution control.
Before a specific pollution
charge or a similar market-based
instrument can be imposed, however, a substantial amount of information will be needed to estimate it reliably. The information
include those on the physical and
economic parameters related to
pollution per subsector, e.g., levels of economic activity, pollution
emission, pollution concentration,
pollution exposure, damage functions and value of damage. In
Metro Cebu as in the Philippines,
it is accurate to say that such mass
of information do not yet exist at a
level that allow reliable computation. Thus, further research on the
physical and economic parameters
of industrial pollution will be necessary in the future so marketbased instruments can be applied.
Finally, some sectors argue
that governance in the Philippines
is highly legalistic and that major
improvements in environmental

management can only be pursued
by first adhering to the national
legislative process. For instance,
other specific actions which may
potentially improve pollution control, e.g., implementation of programmatic EIAs which simplifies
the EIA process for economic
zones, retention of incomes from
polluted-related fines in the regional offices that help upgrade
regional resources and capabilities, and others, can only be implemented by amending existing laws
or drafting new laws. If, indeed,
the law or the lack of it is the problem, then the legal section of the
DENR should be spearheading
efforts to put in place legislation
needed to support pollution management in the regions. 4

Industrial Growth and Environmental Protection in Metro Cebu: Some Challenges and Recommendations

I n the past two decades, partly because of the urban deconcentration Danilo C. Israel ———————— *Based on a paper sponsored by and submitted to the United Nations Industrial Devel- opment Organization (UNIDO) project entitled "Industrial Policy and the Environment in the Philippines." No. 97-04 April 1997 Philippine Institute for Development Studies